The U.S. Department of Labor has concluded its investigation into Scale AI’s compliance with the Fair Labor Standards Act, as per a reliable source familiar with the matter.
The Fair Labor Standards Act (FLSA) is a federal law designed to prevent the misclassification of employees as independent contractors and address issues related to unpaid wages. In March, JS initially reported that Scale AI was under investigation for potential violations of the FLSA.
Additionally, Upwork and Hireart, two HR partners of Scale AI that were also under scrutiny for FLSA compliance as reported by Inc. magazine, have confirmed that the Department of Labor has ceased investigating them as well.
Scale AI, a company valued at $13.8 billion, heavily relies on a workforce it classifies as contractors to perform crucial AI tasks such as image labeling for major tech companies. However, former employees have filed lawsuits alleging underpayment and misclassification as contractors, depriving them of benefits like sick leave.
The reasons behind the Department of Labor’s decision to drop the investigation remain unclear. Scale AI, headquartered in San Francisco, declined to provide a comment, and the DOL did not respond to inquiries.
One possible explanation could be a shift in the DOL’s approach to classifying workers as contractors. On May 1, the agency announced that it was temporarily suspending enforcement of a Biden-era rule that made such classifications more challenging.
Furthermore, Scale AI appears to be cultivating relationships with the Trump administration. CEO Alexandr Wang attended Trump’s inauguration and has advocated for the United States to excel in the field of artificial intelligence.
Meanwhile, Michael Kratsios, Scale AI’s former managing director, was appointed as the new director of the White House’s Office of Science and Technology Policy in March. Although this role does not oversee the Department of Labor, it involves advising the President on matters related to science and technology.
Kratsios has not issued a response to requests for comment at this time.
